Your First Home Loan: A Beginner’s Guide to Getting Started
Buying your first home is one of life’s most exciting milestones but it can also feel overwhelming, especially when it comes to securing a home loan. As a first home buyer, understanding the process, knowing what to expect, and learning how to meet the first home loan criteria will help you move forward with confidence.
This beginner’s guide is designed to walk you through the essentials of applying for your first home loan, from understanding what lenders look for to tips on navigating your home loan application smoothly.
What Is a First Home Loan?
A first home loan is a mortgage product tailored specifically for individuals purchasing their first residential property. First home loans are a specific type of home loan designed for new buyers. Many lenders offer packages or incentives designed to support first home buyers, such as lower deposit requirements, reduced fees, or access to government assistance schemes.
A first home buyer loan doesn’t just mean a standard mortgage, there are often special programs available depending on where you live, your income, and whether you’re buying a newly built home or an existing one. Some first home loans, such as those offered by Kāinga Ora, allow buyers to purchase with a low deposit, sometimes as little as a 5% deposit, making homeownership more accessible.
Why It’s Different for First Home Buyers
Unlike seasoned property investors or second-time buyers, first home buyers often have less experience with the mortgage process, which is why lenders may offer educational resources or simplified processes. Special loan programs are designed to help you get into your first home more easily.
You may also be eligible for first home buyer loan schemes that offer financial assistance such as grants, tax concessions, or deposit guarantees. These schemes are specifically aimed at making buying your first home and the home buying process more accessible, particularly in high-cost areas.
Comparing deposit options can help you achieve home ownership sooner.
Understanding First Home Loan Criteria
Before you dive into the home loan application process, it’s important to understand the typical first home loan criteria that lenders use to assess your eligibility. Meeting the eligibility criteria is essential to qualify for a first home loan, as specific requirements must be met to access support schemes and financial assistance.
Here are the most common factors:
Your income and employment status
Your credit history
The size of your deposit (the first home loan deposit or home loan deposit required may be lower for certain government-backed programs)
The property’s value and location
Income thresholds may differ for an individual buyer versus two or more buyers. For applicants with one or more dependants, the combined income must be $150,000 or less (subject to change).
1. Deposit Size
Most lenders require a deposit of at least 5–20% of the property’s purchase price. Some government schemes may allow you to buy with a lower deposit, and certain programs only need a 5 deposit, making it easier for first home buyers to get started. However, having a larger deposit will generally improve your chances of approval and give you access to better interest rates.
Note: Some lenders may require a cash contribution in addition to your deposit.
2. Stable Income
A regular, stable income is crucial. Lenders will assess your employment history, current earnings, and your ability to make repayments over the life of the loan.
3. Credit History
Your credit report gives lenders insight into how reliably you've managed money in the past. A strong credit score will work in your favour, while defaults, missed payments, or excessive debt may hinder your chances.
4. Existing Debts
Lenders will calculate your debt-to-income ratio (DTI) to ensure you’re not taking on more than you can handle. This includes credit cards, personal loans, car finance, or student loans.
5. Property Type and Value
The property you’re buying, such as a house, must meet certain conditions. Lenders often conduct a valuation to ensure the purchase price is reasonable and that the home is structurally sound.
Getting Ready for Your Home Loan Application
To help you complete your home loan application, here’s a step-by-step guide including how to submit your application online for added convenience.
Once you understand the first home loan criteria, the next step is preparing your home loan application. The more prepared you are, the smoother the process will be.
Here’s what to do:
Gather Your Documentation
Lenders will require:
Proof of income (e.g., payslips, tax returns)
Bank statements (usually from the past 3 - 6 months)
Proof of savings or gifted deposits
Details of any debts or financial commitments
Identification (passport, driver’s licence)
Work Out Your Budget
Use online mortgage calculators to get a sense of what you can afford. Remember to factor in costs beyond the deposit, such as stamp duty, legal fees, insurance, and maintenance.
Choosing the Right First Home Buyer Loan
There’s no one-size-fits-all when it comes to choosing a first home buyer loan. Your decision should be based on your financial situation, goals, and preferences. Different banks may offer varying features, eligibility criteria, and participation in government-backed first home loan programs, so it's important for borrowers to compare their options carefully.
Here are a few key things to compare:
1. Fixed vs Variable Interest Rates
Fixed rate loans offer stability, locking in your repayments for a set period.
Variable rate loans fluctuate with the market, which could save you money but could also increase your repayments over time.
2. Loan Features
Look for useful features like offset accounts, redraw facilities, or the ability to make extra repayments without penalty.
3. Fees and Charges
These can include application fees, ongoing account-keeping fees, and break fees for fixed loans. Read the fine print carefully.
Government Assistance for First Home Buyers
Depending on your location in New Zealand, you may be eligible for government support such as:
First Home Owner Grant (FHOG) – a one-off grant for eligible first-time buyers.
Stamp Duty Concessions – exemptions or reductions for first home buyers.
First Home Guarantee Schemes – helping you purchase with a smaller deposit without needing to pay for lenders mortgage insurance (LMI).
Tips to Improve Your Chances of Approval
Save consistently: Demonstrating genuine savings over time shows lenders you're financially responsible.
Pay down debts: Reducing or eliminating credit card balances or personal loans will improve your borrowing capacity.
Avoid new credit applications: Each credit inquiry affects your score. Hold off on applying for any new loans or cards before your mortgage application.
Get pre-approved: A loan pre-approval gives you a clear picture of what you can afford and shows sellers you’re serious.
Working with a Mortgage Broker
If navigating your first home loan feels daunting, consider working with a mortgage broker company like Mortgage Navigators. We can help you compare lenders, understand your options, and manage the application process from start to finish, all often at no cost to you.
Whether you're dreaming of a city apartment, a suburban family home, or a countryside retreat, Mortgage Navigators will help turn that dream into a reality.